EU 4th Money Laundering Directive

What effect will the introduction of the Fourth Money Laundering Directive have on the way firms conduct their anti-money laundering procedures?

The European Union’s Fourth Anti-Money Laundering Directive (EU4MLD) was implemented into UK law by June 26 2017. The directive includes fundamental changes to AML procedures at law firms, including changes to customer due diligence (CDD) and a strong focus on risk assessments.

What’s changed?

Under previous Money Laundering Regulations (Third Money Laundering Directive), firms could automatically apply simplified CDD under certain circumstances. Under new regulations, firms can use these circumstances as a partial justification for simplified CDD only after conducting a documented risk assessment.

Exemption from enhanced CDD is no longer automatic. A decision to apply simplified CDD will need to be evidenced by a documented risk assessment and include PEP and Financial Sanctions screening.

Local politically-exposed persons (PEPs) must now be identified and are subject to the same scrutiny as foreign PEPs.

The regulations direct firms to develop risk-based policies, and practitioners to conduct client risk assessments as a part of their CDD.